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Wall St climbs as strong earnings offset Amazon slowdown worries

2023-04-28T17:00:00Z

U.S. stock indexes gained on Friday after strong earnings updates from Exxon and Intel dwarfed worries over Amazon’s slowdown warning, while economic data bolstered expectations that the Federal Reserve would hike interest rates next week.

Exxon Mobil Corp (XOM.N) rose 2.2% to hit an all-time high as the energy major reported a record first-quarter profit on rising oil and gas output, aiding a near 2% advance in the S&P energy index (.SPNY).

Chipmaker Intel Corp (INTC.O) gained 4.6% after it said gross margins will improve in the second half of the year.

Denting sentiment, Amazon.com Inc (AMZN.O) shed 3.6% as the company signaled its cloud growth would slow further, overshadowing its better-than-expected quarterly results, weighing on consumer discretionary stocks (.SPLRCD).

“Not every company can continue to take share and increase margins … if other companies are expanding their footprint in that industry, some of the legacy players are bound to see some share taken,” said Ross Mayfield, investment strategy analyst at Baird.

The benchmark S&P 500 (.SPX) was set for a second consecutive monthly gain on better-than-expected earnings from megacap companies including Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O).

Analysts expect first-quarter earnings for S&P 500 companies to now fall 1.9% year-over-year compared with a 5.1% fall expected at the start of April, according to latest Refinitiv data.

Data showed U.S. consumer spending was unchanged in March, while underlying inflation pressures remained strong, keeping the Fed on course to hike interest rates by 25 basis points next week, a move largely priced in by investors.

“These numbers needed to come in quite soft for the Fed to potentially shift to pausing next week … we can pretty much pencil in 25-basis-point rate hike next week,” Mayfield added.

Consumer spending data comes close on the heels of numbers that showed U.S. economic growth slowed more than expected in the first quarter, while plunging consumer confidence in April heightened the risk of the economy falling into a recession this year.

Meanwhile, the U.S. central bank issued a detailed and scathing assessment of its failure to identify problems and push for fixes at Silicon Valley Bank before the U.S. lender’s collapse, and promised tougher supervision and stricter rules for banks.

The KBW Regional Banking index and the S&P 500 bank index (.SPXBK) gained over 1% each.

At 12:08 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 220.39 points, or 0.65%, at 34,046.55, the S&P 500 (.SPX) was up 25.96 points, or 0.63%, at 4,161.31, and the Nasdaq Composite (.IXIC) was up 44.53 points, or 0.37%, at 12,186.77.

First Republic Bank (FRC.N) shares tumbled 45.6% following a report that the troubled lender was most likely headed for receivership under the U.S. Federal Deposit Insurance Corporation.

Snapchat-owner Snap Inc (SNAP.N) dived 17.8% as it warned next quarter results could miss Wall Street targets, while Pinterest Inc (PINS.N) dropped 18.0% after the image-sharing platform forecast second-quarter revenue growth below estimates.

Cloudflare Inc (NET.N) tumbled 24.6% on a downbeat revenue forecast from the cloud services provider, while Colgate-Palmolive Co (CL.N) jumped 4.5% after lifting its annual organic sales forecast betting on consistent price hikes.

Advancing issues outnumbered decliners by a 2.93-to-1 ratio on the NYSE and a 1.95-to-1 ratio on the Nasdaq.

The S&P index recorded 21 new 52-week highs and two new lows, while the Nasdaq recorded 42 new highs and 97 new lows.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 10, 2023. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 19, 2023. REUTERS/Brendan McDermid